Financial relief was supposed to come in three days.
Instead, some Nevadans say weeks have passed since they filled out their application for an economic disaster injury loan backed by the U.S. Small Business Administration.
One of two small-business relief programs funded by Congress in the $2 trillion CARES Act, economic disaster injury loans are designed to provide businesses with fewer than 500 employees money they can use to meet their financial obligations, such as rent or payroll. On paper, the first $10,000 of the disaster loan is supposed to be delivered as an advance within three days of applying. That amount is considered forgivable — an emergency economic injury grant. Any additional money borrowed — up to $2 million — is offered with a low interest rate.
“The application wasn’t too bad,” says Scott Miller, the sole proprietor behind Geeks on the Go, who submitted an application after reading about the program in the press. “You get this receipt. It’s this thing that gives you an application number. ‘Don’t call us, we’ll call you.’ No phone number. No address. Nothing. Just ‘we have it’ and it verifies your email.”
Miller says he has searched for ways to get a status update on his disaster loan application but hasn’t found anything. He’s in an indefinite limbo.
Also in limbo is Majestic Repertory Theatre. The majority of the company’s revenue comes from single ticket sales at its 99-seat theater on Main Street in the Arts District. The four-year-old theater was scheduled for a run of “Hedwig and the Angry Inch,” a popular cult musical that would have filled seats. But entertainment events like that were some of the first things to be prohibited in the name of social distancing.
Two weeks ago, Majestic’s Artistic Director Troy Heard applied for the $10,000 economic disaster injury loan. He says the funds are needed to keep Majestic afloat during the mandated shutdown and possibly afterward, depending on what the post-shutdown world looks like. He knows even after the restrictions are lifted, some people may be wary of gatherings and immersive experiences, which Majestic specializes in.
He has yet to hear back about his application.
While he waits, he’s applying for other grant money designed specifically for art and cultural organizations — $2,500 here, $500 there. He’s also working with members of the company to find a way to monetize virtual shows.
With looming statewide budget cuts and a tsunami of people applying for assistance, he is hoping the powers that be don’t overlook the importance of the arts in communities and culture.
“It’s entertainment, damn it,” he adds. “We need it. It’s escapism. The greatest Hollywood films came out of the Great Depression. Let’s not forget that. You have to be entertained or else you’re going to go insane.”
Different program, same problems
Economic disaster injury loans are one of two relief options funded by the CARES Act. The other option is the Paycheck Protection Program, which provides forgivable loans of up to $10 million to small businesses under the condition they retain (or rehire) their employees for a specified amount of time. Congress allocated $350 billion to the Payment Protection Program.
Sole proprietors are eligible for the program. When the small business programmer Scott Miller found that out, he applied for that in addition to the disaster loan. First, he thought he’d caught a break. Banks have said they are prioritizing existing customers, and Miller had a business account with an existing one. But when he had a question about something on the application, he found himself with nobody to turn to for help.
“I’m stuck and there’s nobody to talk to,” he says. “They tell you not to call. The branches are all closed except teller-based transactions.”
Miller isn’t sure where to go from here. He and his wife, who run the business together, are living off their savings. Neither can apply for unemployment benefits through the state because it isn’t yet set up to handle applications from self-employed people.
“I recognize the need for having done what we needed to,” he says of the shutdown of non-essential businesses, which shuttered all of his small business clients in mid-March and triggered them to end their services and projects with him. “The risk to people’s health was too much. But it’s hard when you’re bearing the brunt of this.”
Still, he considers himself lucky because he has no employees relying on him.
Emily Smith does.
The CEO of Nevada Blind Children’s Foundation says she and the nonprofit’s board members were already talking about staff and budget reductions when the Payroll Protection Program passed and became an option. “This could be our saving grace,” she recalls thinking.
She filled out an application. Then another. She estimates she’s had to revisit the process 10 different times over the past few weeks because the directions kept changing. Bankers didn’t have proper guidance. She kept needing to find additional supporting documents. Luckily, someone on the board had a connection with a bank, which might have helped push the process along.
Last Smith heard, an account representative at the bank told her they are “revamping” their internal system so they can process straightforward applications like the foundation’s quicker. She’s been told that after her application processes, the foundation could see the money in 10 days.
That seems like good news, until Smith sees news reports that some banks have already reached their capacity with applications, or that banks have distributed billions of dollars already.
“You have to wonder: Where are we at on this list? Will we get this?”
Smith says she’s already reduced her own pay and furloughed staff. At the same time, she’s tried to adapt their operations to continue to meet the needs of the medically fragile children they serve. Like Clark County School District, where most of their students are enrolled, they have focused on making sure the families they are connected to have their basic needs met and their emotional support.
She says before she made the cuts, one of her most recent hires came to her and said they would be okay being furloughed.
“(They said), ‘I just want the organization to be okay, and I hope I can come back one day.’ You don’t find people like that every day. This loan option would allow us to bring people like that back.”
So many questions, no answers
The questions surrounding the economic disaster injury loans and the Payment Protection Program aren’t confined to the small business applicants.
On Friday, Sens. Catherine Cortez Masto and Jacky Rosen signed onto a letter urging SBA Administrator Jovita Carranza to follow the congressional mandate of making the emergency grant money available within three days of applying.
“Small businesses across the country are reporting that, although they are eligible and have applied for (a disaster loan) and then requested the (grant), they are not receiving the advance,” reads the letter. “Businesses are receiving conflicting guidance on the expected timing for receiving these critical funds, and many businesses cannot afford to wait as they try to keep their employees on payroll and pay rent.”
Nevada lawyer Brian Shapiro says his law firm has seen an increase in calls from small business owners inquiring about bankruptcy.
“They can’t weather the storm that long,” he says. “A lot of these small companies were hopeful if they got that advance, they could survive a month or two months on a streamline budget.”
But now many are weeks into the process and don’t see the light at the end of the tunnel.
“The belief they will receive it has fizzled,” adds Shapiro.
The lawyer has taken to social media to try and drive attention to the issue. He’s also prepared some bankruptcy paperwork but hasn’t filed anything, instead advising his clients to wait on pulling the trigger until there is an urgency to filing. Maybe things will improve and relief will come.
Even high-level officials within the Small Business Administration have aired their grievances with the execution of the Paycheck Protection Program. The Washington Post late last week reported comments made by SBA’s Nevada District Director Joseph Amato during a recorded teleconference with small business owners earlier in the week.
“(Banks) that had no problem taking billions of dollars of free money as bailout in 2008 are now the biggest banks that are resistant to helping small businesses,” said Amato.
At the time Amato made his comments, several large banks, including Chase and Wells Fargo, had not signed up as lenders for the Paycheck Protection Program. The one large bank that had — Bank of America — was only accepting applications from existing customers. Since then, some progress has been made with lenders but small businesses are continuing to report issues finding a lender who will process their application.
The hurdles, both real and perceived, have some critics wondering whether the smallest of small businesses will be overlooked in favor of businesses that are large enough to have a finance person dedicated to navigating the process but still small enough to be considered a small business by the SBA standard of 500 employees. (And even then, there are exceptions made for certain industries that allow businesses with even more employees.)
Saul Ramos, the SBA’s Nevada deputy district director, acknowledged to the Current the issues being raised publicly about the loans but encouraged people to keep trying and to stay patient. He says the SBA has addressed some of the issues, including streamlining the application so it takes significantly less time than it did when the programs first launched.
Ramos couldn’t give a timeline for how quickly anyone should expect the economic relief, nor did he have any comment about who lenders might prioritize given the mass influx of applications and limited amount available.
“The banks are processing the applications,” he said.